Seizures of Foreign Assets in Russia Highlight Risks for Firms Considering Post-Trump Re-entry

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In October 2024, three men entered the Moscow offices of Glavprodukt, Russia's leading canned food producer, and announced they were taking over the company’s management. They were sent by Rosimushchestvo, Russia’s federal property agency, following a decree from President Vladimir Putin to place Glavprodukt, along with other assets owned by the U.S. company Universal Beverage, under Russia’s “temporary management” — effectively handing control to the state.

This move follows a pattern of Russian authorities taking control of foreign-owned businesses since the invasion of Ukraine in February 2022. Glavprodukt, however, marks the first U.S.-owned company to experience this fate. Other foreign companies, like Danish brewer Carlsberg and Finnish utility Fortum, have faced similar actions, but this marks a shift toward the broader seizure of foreign and domestic assets by the Russian state.

President Trump’s push to restore ties with Russia and potentially lift economic sanctions has led to speculation about U.S. companies returning to Russia. However, no companies have announced plans to do so, and it remains unclear how Russia will regain the confidence of Western investors or recover lost assets.

"Temporary management" is just one method Russia has used to appropriate assets, often redistributing them to loyalists. But this process has not been good for business. Glavprodukt’s sales have dropped, and the founder, Leonid Smirnov, claims to have lost control of his company. Soon after the takeover, he noticed that the ownership in Russia’s corporate registry had shifted to a division of the Russian Federation, suggesting the change might not be temporary.

Other companies with Russian operations, including Fortum, Uniper, Danone, and Carlsberg, have seen their assets seized or sold under Russian state control. Once a company falls under "temporary management," it’s unlikely to regain its assets. Russia has even passed laws to claim U.S. property as compensation for its own frozen assets abroad, and new legislation is expected to extend this to other Western nations.

The legal system in Russia already offers powerful tools for seizing assets. For example, Carlsberg lost operational control of its Russian assets when Moscow intervened and put its Baltika Breweries stake under temporary management, eventually forcing the company to sell at a significant loss to local buyers.

At Glavprodukt, production and sales have dropped by 10%, with suppliers and customers severing ties. Meetings have stopped, bonuses haven’t been paid, and the new management has consolidated the business under a single command. Smirnov believes this is part of a strategy to force a sale at a discounted price, a tactic that has been seen in many other foreign businesses exiting Russia. Experts like Septimus Knox of S-RM warn that when management is chosen for political loyalty rather than competence, the value and performance of the asset inevitably decline.

Paraphrasing text from "Reuters" all rights reserved by the original author